Amendments to DIP Guidelines: Rights Issues and IDRs

SEBI today issued amendments to the SEBI (Disclosure and Investor Protection) Guidelines, 2000 with a view to simplifying the process for a rights issue. Since listed companies embarking on a rights issue are already subject to the disclosure norms under the listing agreement, substantial information regarding such companies are already available in the public domain, and hence SEBI has decided to streamline the disclosures. This addresses a long-standing complaint that rights issues are cumbersome and costly, thereby putting off several companies from accessing capital through this route. In addition, SEBI has also confirmed the use of the Applications Supported by Blocked Amount (ASBA) process for rights issues. Speed is also of the essence, as the time period taken for finalisation of basis of allotment has been reduced to 15 days from the earlier period of 42 days from the close of the issue.

In an earlier development (on July 31, 2009), SEBI effected amendments to the Guidelines, mainly with a view to specify financial disclosures for Indian Depository Receipts (IDRs). Since companies from various jurisdictions (with differing financial disclosure requirements) could list in India, there is a need to introduce some level of uniformity. The new disclosures require financial statements to be in accordance with Indian GAAP, IFRS or US GAAP. The amendments also take into account incidental matters such as audit report, corporate governance requirements, etc. The curious aspect regarding IDRs is that despite a number of changes (and further relaxations) in rules and guidelines by the Ministry of Company Affairs and SEBI progressively over the last few years, the instrument appears to have received tepid response and does not seem to have been lapped by industry at all.

About the author

Umakanth Varottil

Umakanth Varottil is an Associate Professor at the Faculty of Law, National University of Singapore. He specializes in corporate law and governance, mergers and acquisitions and cross-border investments. Prior to his foray into academia, Umakanth was a partner at a pre-eminent law firm in India.

The opinions expressed herein are those of the contributors (which shall, for these purposes, include guests) in their personal capacity and do not, in any way or manner, reflect the views of the organizations that the contributors are presently associated with, or that have previously employed or retained the contributors. Postings on this blog are for informational purposes only. Nothing herein shall be deemed or construed to constitute legal or investment advice. Discussions on, or arising out of this, blog between contributors and other persons shall not create any attorney-client relationship.

Many of the links on this blog will take you to sites operated by third parties. The contributors of this blog have not reviewed all of the information on these sites or the accuracy or reliability of any information, data, opinions, advice, or statements on these sites. The contributors do not endorse these sites, or opinions they may offer. These third-party links are offered solely for the purpose of discussion and thinking on Indian corporate law and other related topics. It is also possible that some of the pages linked may become inactive after the lapse of a period of time.